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TMI Blog2010 (12) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the Ld. ITAT was right in law in allowing the assessee's claim of 25,000 on account of education fund ignoring the fact that the assessee had been following the mercantile system of accounting and that the liability of the annual subscription for the earlier assessment year of which the assessee was well aware was not allowable in the year relevant to the assessment year 1994-95? 2. Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in allowing the claim of 6,19,637 on account of subscription paid to Haryana State Cooperative Development Federation relating to the assessment year 1992-93, ignoring the fact that the assessee had been following the mercantile syst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er used nor was in usable condition and was kept idle. The CIT(A) affirmed the view of the Assessing Officer but the Tribunal upheld the claim of the assessee as follows:- "4. Ground No. 3 is that the CIT (Appeals) was not justified in upholding the disallowance of 25,000 on account of education fund and 6,19,671 on account of subscription paid to Haryana State Cooperative Development Federation. It was submitted on behalf of the assessee that this issue stands decided in favour of the assessee by the order of the Tribunal for the assessment year 1995-96 in ITA No. 2519/Delhi/2000, dated 23-11-2004. In this order, the Tribunal has dealt with the amount of 25,000 paid as subscription to the education fund. It was noted that the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these are reproduced below: "Objection 8.2 Some machinery items such as vapour cell of 65.94 lakhs, Juice Clarifier of 20.45 lakhs and Sugar Grader of 4.17 lakhs were lying idle from the last year 1992-93, and in other words above said Machinery items were installed without necessity. Besides this Fly Ash Arrestor Pad Pweitier (sic) of 6.73 lakhs has also not in working order from the last year 1992-93. If interest is calculated at the rate of 18 per cent PA on the amount invested for installation abovesaid machinery items in that case less of interest of 17,51,220 annually. Reply It is submitted that the machinery mentioned in this para were installed to increased the capacity of 1250 TCD Plant. All the mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old the strong argument raised by the learned CIT DR before us that though the machinery might have been installed and used in the earlier year, it may not have worked during the year under consideration. As already noted, the basic flaw in the approach of the income-tax authorities is that they merely relied on the audit objection, without taking into consideration how the assessee met the audit objection. The facts brought out in the assessee's reply to the objection are supported by the certificate by the engineers kept at pages 11 and 12 of the paper book. In these circumstances, we direct the Assessing Officer to allow the depreciation. The ground is allowed." 3. We have heard learned counsel for the parties. 4. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is noticed that a sum of 25,000 paid to Haryana State Coop. Development Federation for education fund relates to assessment year 1992-93 and an other some of 6,19,671 paid to Haryana State Coop. Development Federation as subscription also relates to financial year 1992-93. Both these amounts are disallowed being not the financial year 1993-94, however, is allowed as deduction. Total disallowance under this head works out to 6,44,672." 8. Admittedly, the assessee followed mercantile system of accounting. In such situation, the deduction claimed could not be allowed in the year of payment but in the year when the amount were due. 9. As regards question (3), no doubt the auditors of the assessee objected to machinery being k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord 'depreciation' as also the object of allowing depreciation. In the present case, the machinery in question is vapour cell, juice clarifier and fly ash arrester paid pweitier (sic) which according to the assessee had to be kept ready for use for its business expediency. Stand of the assessee is that it resulted in increase of capacity of the plant and that on account of technical justification for the said machinery, items of the machines were installed. Even though the auditors may not have accepted the said stand, the assessee was entitled to free play in joints in taking a decision to install the machinery if in its view the same was necessary for its business. If the assessee was to install such a machinery on its bona fide business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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